Optimisation programme hits profits at DHL Supply Chain

DHL’s Supply Chain division saw EBIT decline to €53m in the first quarter of 2015 from €85m the year before despite a 12.4 per cent rise in sales to €3.9bn. The group blamed the profit decline on planned, non-recurring costs for the supply chain optimisation programme.

“The division intends to take advantage of the optimisation program to increase margins to 4 per cent to 5 per cent by 2020 through further standardization, greater efficiency and improved utilisation of economies of scale,” it said.

In the Express division, revenue climbed by 12.5 per cent in the first quarter to €3.2bn and EBIT rose by 20.3 per cent to €332m.

Revenue was also up in the Global Forwarding, Freight division, rising by 7.6 per cent to €3.8bn. However, the division’s operating profit experienced a sharp decline to €17m in the first quarter (2014: €49 million).

“This is due to on-going margin pressure in the overall market, as well as direct and indirect costs related to the transformation programme,” the group said.

Roger Crook, who headed the division, resigned at the end of April 2015.

The gorup said: “In the wake of the weak development, the new management of the division will intensively focus on improving the operating performance.”

For the whole Deutsche Post DHL Group, revenue grew by 8.8 per cent over the prior-year quarter to €14.8bn. Operating profit decreased by 1.0 per cent in the first quarter to €720 million.

CEO Frank Appel said: “We saw a moderate start to the year, as we expected. Our strategy, aimed at growth in e-commerce and the emerging markets, in particular, is progressing. At the same time, as we transition from Strategy 2015 to our new Strategy 2020, we are now consciously undertaking a number of specific measures.

“These measures will allow us to build a strong base to bring our strategic priorities forward. We are investing significantly to ensure that our four divisions are optimally positioned, even though this is having a temporary impact on our performance, as we previously discussed. Our overarching focus today is on the sustainable, profitable growth of our business.”

* DHL has redesigned its Innovation Centre to speed the development of “game changing new services and collaboration with customers and academia”. It is also opening a second Innovation Centre in Singapore.

The company reckons that the internet of things alone will give the logistics industry an US$1.9 trillion boost, generating US$8 trillion worldwide in value over the next decade. And global distance selling of €616bn in 2013 will grow annually by 10.7 per cent until 2018.

Group CEO Frank Appel said: “Customer-centric innovation is key to two of our major ambitions. One is to play a pioneering role in spearheading the global evolution of logistics which is at the core for the sustainability of our planet.

“Second, to remain the logistics leader by innovating products and services that our customers need most – whether that is to make an e-commerce delivery, design a global supply chain or ship temperature sensitive pharmaceuticals. To achieve this, we will continue to look far into the future, where our goal is to continually strive to convert our innovations into marketable solutions, to make our customers more successful.”

The plan is for the centre to work more collaboratively with customers, experts and academics in many fields.

DHL has a network of more than 50 experts looking at sustainable solutions to keep world trade on the move, creating innovative services and solutions.

In Singapore, the new DHL Innovation Centre will be located within DHL’s US$100m Advanced Regional Centre which is currently under construction.